Posts Tagged ‘writedowns’
by stuartbramhall in Sustainability, The Global Economic Crisis
(This is the second of two blogs about Spain’s growing concentrating solar power industry and it’s potential role in solving that country’s debt crisis.)
By the end of 2010, Spain had surpassed the US as the world leader in CSP production, increasing their total capacity to 531.5 MW, from 299.8 MW the year before. By October 2011, 420 MW more had gone into operation, with an additional 1200 MW under construction. Plants accounting for an additional 2500 MW are entered in the Pre-allocation Register and are expected to be installed by the end of 2013.
In October 2011 the Spanish Association of the Solar Thermal Industry commissioned Deloite, one of the Big Four international financial analysis firms (along with PricewaterhouseCoopers (PwC), Ernst & Young, and KPMG) to analyze the economic viability of Spain’s CSP industry. According to the Deloitte report, Macroeconomic Impact of the Solar Thermal Electricity Industry in Spain, the total contribution of the CSP industry to Spain’s 2010 GDP was 1.6 billion Euros. Of this 89.3% related to construction activities and the rest to plant operation. If the support needed to reach penetration targets set in the 2011-2020 PER (Plan for Renewable Energy in Spain) is maintained, the contribution to the GDP could be as high as 3.5 billion Euros in 2020.
The Major Economic Benefits Stemming from CSP
More importantly, in view of Spain’s 23% unemployment rate, the number of people employed by the industry came to 23,844 in 2010. This, in turn, saved Spain 176 million Euros in unemployment subsidies. Based on PER targets, the CSP industry is on track to maintain this level throughout the decade and to provide nearly 20,000 jobs after 2020. A good proportion of these jobs would be generated by exporting parabolic mirrors and other CSP technology and expertise to the rest of the world. The five years Spain has spent refining CSP technology has made them the unquestionable leaders in the industry. Spanish companies will play a major role in the Concentrating Solar Power Alliance (CSPA), an organization formed in March to educate U.S. regulators, utilities and grid operators about the unique benefits of concentrating solar power (CSP) as a low carbon energy source and driver of economic growth (see Concentrating Solar Power Alliance Launched).
The Deloitte report goes on to suggest that Spanish CSP plants could produce even greater financial return if the 50 MW per unit limit set by the Special Regime were removed. In the United States power plants are being built with much larger turbines. With this technology, energy collection performance is essentially unaffected by size, while costs of generation are lowered considerably.
Another potential fly in the CSP ointment is the recent temporary suspension of “feed-in tariffs” for CSP. The suspension will not affect plants that are already receiving payments or those already in the registry for pre-allocation. Pascual Polo, Secretary General of the Spanish Solar Thermal Industry Association (ASIT) is optimistic the ban will be reversed. The 4.7 billion Euros the feed-in tariff costs the Spanish government is 1/337 of the EU solar thermal subsidy Spain stands to lose if they fail to meet the goals set in the PER (see http://www.solarthermalworld.org/node/3308).
The Likelihood of Spanish Default
The trillion dollar question is whether Spain will default before the Spanish banks manage to pay off their toxic real estate debt. The Spanish default projected by Wall Street and most of the mainstream media makes the assumption that the Spanish government will transfer their banks’ private debt to government books, like the governments of the US, Ireland, Iceland and Greece did. I think this is unlikely, given Spain’s militant anti-austerity movement and the government’s hard line approach thus far.
Unlike Bush and Obama, the Spanish government didn’t simply hand their banks billions or trillions of bailout money to spend as they pleased. Nor did they assume their banks’ “toxic” debts. Instead they required Spanish banks to record – and cover – $105 billion dollars of “writedowns” (translation: bad debts or write-offs). Many banks unable to absorb the losses were allowed to fail. Spain’s bailout fund “acquired” (translation: nationalized) three of them last September and purchased $17.7 billion of shares in others (see Spain’s Unsellable Real Estate Assets).
In December, even Spain’s new right wing Popular government avoided appropriating new bailout funds by using 5.2 billion Euros from the country”s deposit-guarantee scheme to clean up nationalized lender Caja de Ahorros del Mediterraneo and broker its sale to Banco Sabadell (see On-line Wall Street Journal).
The new government has also placed immense pressure on regional governments to reign in their debt problems. Soaring regional debt has caused bond holders to jack up the interest rates the Spanish government pays to finance their sovereign debt. The right wing Popular government has talked about forcing small municipalities to merge, sell their public television channels, and redefine what counts as “basic” health services (which are regionally administered). They have threatened the elimination of municipalities with fewer than 10,000 inhabitants and the imposition of strict limits or even a ban on borrowing by local and regional governments (see China Daily).
It was in response to this pressure that Rasquera came up with their ingenious scheme lease land for marijuana cultivation to pay off their debt.